Awaiting tax reform clarity, Pfizer delays potential M&A

(Reuters) – Pfizer‘s (NYSE:PFE) chief executive said on Tuesday he would prefer to wait for clarity on U.S. tax reform before engaging in any big deals in order to get a better understanding of any potential acquisition target’s value.

The largest U.S. drugmaker has been under increasing pressure from investors and Wall Street to pull off a large deal to help reignite growth.

That pressure may intensify after Pfizer’s second-quarter revenue missed Wall Street estimates on Tuesday due to a decline in sales of the blockbuster pneumonia vaccine Prevnar and generic competition for Pristiq for depression.

“There are short-term events in the marketplace, such as tax reform, that may change asset values. Any focus on (business development) is somewhat delayed by resolution of that,” CEO Ian Read told analysts.

“If it’s not done this year and there’s no clear path that you could take to the bank of (tax reform) being done early next year, then you move on … and we’ll adapt our strategy accordingly,” Read said separately in an interview with Reuters.

Read called for a territorial tax change to ensure more equality with overseas-based rivals on U.S. taxes.

However, overall revenue fell to $12.9 billion from $13.15 billion, below analysts’ average estimate of $13.08 billion, according to Thomson Reuters I/B/E/S.

“These results show that Pfizer’s growth drivers are still insufficient to drive meaningful sales growth against the backdrop of generic erosion,” Berenberg analysts said.

The company expressed confidence in its drug pipeline. Read said it has 15 drugs with annual sales potential of over $1 billion that could win approval over the next five years.

It has high hopes for approvals of earlier use of Ibrance and the prostate cancer drug Xtandi that would boost sales. An Xtandi approval for non-metastatic prostate cancer, for example, would significantly expand the number of patients and duration of use.

Pfizer raised the midpoint of its full-year adjusted earnings forecast by 2 cents and now expects $2.54 to $2.60 per share. It maintained a revenue forecast of $52 billion to $54 billion, as Prevnar in Europe, Xtandi and Pfizer’s biosimilar of the arthritis drug Remicade have not performed up to company expectations. Excluding items, Pfizer earned 67 cents per share, beating the average analysts’ estimate by a cent.